STB Issues Decision on CP’s Declaratory Order Petition
Written by Marybeth Luczak, Executive Editor
The Surface Transportation Board (STB) has granted in part Canadian Pacific’s (CP) petition for declaratory relief: It confirmed that CP may use “discovery” under STB regulations to seek relevant material from Kansas City Southern (KCS) to prepare its control application.
CP filed its petition for declaratory relief on May 27, 2021, requesting confirmation that KCS is obligated to provide the information needed to prepare CP’s control application.
In STB’s Aug. 2, 2021 decision (download below), it explained that “CP asks the Board to confirm that KCS remains obligated to provide CP with information CP needs to complete its application, and that CP may retain and continue to use materials provided by KCS before their merger agreement was terminated for the purposes of preparing and defending CP’s application. … KCS states that the terms of the parties’ Mutual Confidentiality Agreement address the parties’ contractual rights as they concern the handling of materials previously provided by KCS upon termination of the merger agreement. … As a general matter, the Board leaves the enforcement of private contracts to the courts and will not opine here on the parties’ agreement. … While CP argues that the [Board’s] Protective Order … governs the materials KCS previously provided to CP, the Protective Order does not provide a basis for the relief sought by CP. The Protective Order does not require the production of particular information and is generally intended to protect the discloser of material (here, KCS). … Moreover, even if none of the scenarios set forth in the Protective Order that trigger mandatory destruction or return of material has occurred … the Protective Order does not preclude the possibility that other voluntary arrangements could trigger a duty to return voluntarily exchanged materials.
“CP’s arguments that it is in the public interest to allow it to prepare an application do not support its request for a declaration that KCS must permit or provide continuing access to KCS’s confidential material. CP has available mechanisms that would permit it to submit an application to acquire control of KCS, even without the cooperation of KCS. … CP may seek discovery from KCS (with an opportunity to seek to compel production) and may seek waivers from the Board related to its application requirements. CP has not provided a persuasive argument for why it cannot use those processes.”
CP on Aug. 2 released the following response to the STB decision:
“CP is gratified by the STB’s decision released today [Aug. 2], in which the STB confirms that CP may use the STB’s discovery processes in the CP-KCS docket, Finance Docket No. 36500, to immediately seek from KCS the materials that are ‘relevant to its preparation of an application of authority to acquire control of KCS’ to be filed in that docket.
“The Board also noted that CP may seek a waiver from otherwise applicable informational requirements to the extent it cannot obtain information from KCS, such as due to KCS’s ‘reluctance to cooperate.’
“This decision validates CP’s plan to submit its Application for authority to control KCS in the CP-KCS docket, which will present the STB with the only viable Class I combination that is in the public interest. CP looks forward to obtaining the needed information from KCS and completing and filing its Application.”
CP also reiterated that “CP-KCS remains the only viable Class I combination. The STB has already approved CP’s use of a voting trust and affirmed KCS’s waiver from the new rail merger rules it adopted in 2001 because a CP-KCS combination is truly end-to-end, pro-competitive, and the only viable Class I combination. CP continues to pursue its application process to acquire KCS so that the pro-competitive CP-KCS combination can be reviewed by the STB and implemented without undue delay, in the event that KCS’s agreement with CN is terminated or CN is otherwise unable to acquire control of KCS.”
